ECO Exam #2 Questions

Refer to Fig. 9-14. When the country When the country for which figure is drawn allows the internacional trade in crude oil

b. producer surplus changes from the area C to the area B + C+ D.

Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 2,500, consumption equals 7,000, and government purchases equal 3,000. What are private saving and public saving?

1,500 and -500, respectively

1. All of the following will likely trigger increases in output except: A. increases in the labor force B. increases in labor productivity C. increases in interest rates D. increases in consumer spending

C. increases in interest rates

When a country that imports a particular good imposes an import quota on that good A) consumer surplus increases and total surplus increases in the market for that good. B) consumer surplus increases and total surplus decreases in the market for that good. C) consumer surplus decreases and total surplus increases in the market for that good. D) consumer surplus decreases and total surplus decreases in the market for that good.

D). consumer surplus DECREASES and total surplus DECREASES in the market for that good.

When you specialize and trade according to comparative advantage, you can compare what you can do relative to ________ and choose to produce the output that has the _________ opportunity cost.

Other things you could do; lowest

In the economy of Wrexington in 2008, consumption was $1000, exports were $100, government purchases were $450, imports were $150, and investment was $350. What was Wrexington's GDP in 2008? a) $1750 b) $1850 c) $1900 d) $2050

a) $1750 (add all, subtract 150 which is the imports)

Per Capita real GDP measures:

a) National output adjusted for price level changes and population

A US publisher purchases new computers that were manufactured in the US. This purchase by itself makes- a) a positive contribution both to investment and to GDP. b) a positive contribution to GDP, but it does not affect investment or consumption. c) a positive contribution to investment, but it does not affect GDP. d) a positive contribution both to consumption and to GDP.

a) a positive contribution both to investment and to GDP.

The source of the supply of loanable funds a. is saving and the source of demand for loanable funds is investment. b. is investment and the source of demand for loanable funds is saving. c. and the demand for loanable funds is saving. d. and the demand for loanable funds is investment.

a. is saving and the source of demand for loanable funds is investment.

Consider two items that might be included in GDP: (1) The estimated rental value of owner-occupied housing; and (2) purchases of newly-constructed homes. How are these two items accounted for when GDP is calculated? a) Both item (1) and item (2) are included in the consumption component of GDP. b) Item (1) is included in the consumption component, while item (2) is included in the investment component. c) Item (1) is included in the investment component, while item (2) is included in the consumption component. d) Only item (2) is included in GDP and it is included in the investment component.

b) Item (1) is included in the consumption component, while item (2) is included in the investment component.

Refer to Figure 26-1. Which of the following events would shift the supply curve from S1 to S2? a. in response to tax reform, firms are encouraged to invest more than they previously invested. b, in response to tax reform, households are encouraged to save more

b, in response to tax reform, households are encouraged to save more .....

If Huedepool Beer runs into financial difficulty, the stockholders as a. part owners of Huedepool are paid before bondholders get paid anything at all. b. part owners of Huedepool are paid after bondholders get paid. c. creditors of Huedepool are paid before bondholders get paid anything at all. d. creditors of Huedepool are paid after bondholders get paid.

b. part owners of Huedepool are paid after bondholders get paid.

In the economy of Wrexington in 2008, nominal GDP was $10 trillion and real GDP was $4 trillion. What was Wrexington's GDP deflator in 2008?

c) 250

When a country allows trade and becomes an importer of a good, a. both domestic producers and domestic consumers are better off. b. domestic producers are better off, and domestic consumers are worse off. c. domestic producers are worse off, and domestic consumers are better off. d. both domestic producers and domestic consumers are worse off.

c. domestic producers are worse off, and domestic consumers are better off.

If a reform of the tax laws encourage greater saving, the result would be a. higher interest rates and greater investment. b. higher interest rates and less investment. c. lower interest rates and greater investment. d. lower interest rates and less investment.

c. lower interest rates and greater investment.

Which of the following is correct? a. In the national income

c. the financial system.....

Workers displaced by trade will eventually find jobs in a. another country. b. the government sector. c. the industries in which the country has a comparative advantage. d. a different company in the same industry.

c. the industries in which the country has a comparative advantage.

Social security payments are:

d) Excluded from GDP because they do not reflect the economy's production

If a US citizens buys a television made in Korea by a Korean firm, then: a) US net exports decrease and US GDP decreases b) US net exports are unaffected and US GDP decreases. c) US net exports are unaffected and US GDP is unaffected d) US net exports decrease and US GDP is unaffected

d) US net exports decrease and US GDP is unaffected

The U.S. federal debt grows whenever- a) The federal budget shows a deficit B) the federal government borrows c) the federal government issues treasure bonds d) all of the above

d) all of the above

Refer to Figure 9-14. For the saddle market, area B represents a. the deadweight loss of the tariff. b. the increase in producer surplus, relative to the free-trade situation c. government's revenue from the tariff. d. None of the above is correct.

d. None of the above is correct.

Which of the following equations will always represent GDP in an open economy? a. S = I - G b. I = Y - C + G c. Y = C + I + G d. Y = C + I + G + NX

d. Y = C + I + G + NX

2. If an economy's GDP falls, then it must be the case that the economy's a. income falls and saving rises. b. income and saving both fall. c. income falls and expenditure rises. d. income and expenditure both fall.

d. income and expenditure both fall.